As part of his efforts to comprehensively reform the tax code, Senate Finance Committee Chairman Max Baucus (D-MT) released a staff discussion draft on December 18, 2013 that proposed a dramatically simpler set of energy tax incentives that are technology-neutral, more predictable, and promote cleaner energy that is made in the United States.
Policymakers have included tax breaks for energy in the tax code for nearly one hundred years. These incentives were created with good intentions to create jobs, promote energy security, and help reduce air pollution and environmental damage. But over the years, the number of provisions has ballooned into 42 different energy tax incentives, including more than a dozen for fossil fuels, ten for renewable fuels and alternative vehicles, and six for clean electricity. Twenty five of these incentives are temporary. This patchwork of incentives is overly complex and far less effective than it could be. It’s also expensive. Were we to continue extending the current collection of incentives, it would cost nearly $150 billion over ten years.
Tax reform presents an opportunity to reevaluate these tax breaks. The United States needs a tax code that promotes clean and domestically-produced energy in a way that is clear, predictable, and neutral between different sources of clean energy. To that end, the discussion draft streamlines the existing system by replacing the current 42 incentives with two performance-based, technology-neutral, long-term incentives for the production of clean electricity and clean transportation fuels.
The discussion draft can be found here and includes a staff summary, technical explanation and legislative language. At the end of the staff summary, there are specific questions as well as a general request for comment. Please review the proposal. What are your thoughts on this discussion draft for energy tax reform?
Simplifying the current tax code would help to address many of the compliance-related deadweight losses that American businesses face. According to PwC’s annual “Paying Taxes” study, the tax-compliance burden for… Read more »
What are the appropriate “measures of merit” that should shape a national energy policy, and more specifically, energy tax policies? The January 2014 Senate Finance Committee draft legislation starts with… Read more »
Certainly tax reform is one of the best hopes for our economy today, if partisan things and vested interests don’t scuttle it. In fact — the most serious urgent problem… Read more »
I deal in electric vehicles and renewable energy. If you go 100 years into the future, it’s clear we will no longer be using oil as a personal transportation fuel.… Read more »
Given that the Japanese economy has been morbid for several decades, I’m surprised that Werbos would point to Japan as a role model. Simplifying the tax code is a good… Read more »
Ambassador Baucus’s energy tax reform proposal is a good start. It consolidates a Hodge-podge of tax incentives into two longer-term expenditures for electricity and fuels technology that should provide certainty.… Read more »
I am pleased though not surpised that Matt and I agree that a greater focus on innovation is needed. But I would quibble with his bottom line regarding the EIMTC:… Read more »
I’ve just posted a review of how the Baucus proposal is likely to greatly increase taxpayer subsidies to nuclear power. It can be viewed here: http://earthtrack.net/blog/sen-baucus-energy-subsidy-tax-reform-proposal-would-provide-windfall-nuclear-power There are other structural… Read more »
In any applied economics class what would the professor say in response to this proposal? Let me quote from Gilbert Metcalf’s paper in the American Economic Review (volume 98 issue… Read more »
These proposed changes are pretty good as long as clean is well-defined and includes hydro and nuclear, which are usually eliminated from clean consideration for no good reason. The Obama… Read more »
Senator Baucus should be commended for moving our nation closer to comprehensive tax reform, particularly as it relates to the energy tax code. The current system is a complex patchwork… Read more »
[…] following post is SAFE’s contribution to a dialogue on the relative benefits of changing the energy tax code, from the OurEnergyPorlicy.org […]
I certainly am for measures to simplify the tax code, but with due respect to Senator Baucus and his committee … what looks simplified to them doesn’t do much for… Read more »
As always, definitions are critical, and the definition of “clean” here is lacking. Like Doug Koplow, I think the draft is a big push toward nuclear power, and I don’t… Read more »
Five principles in Sen. Baucus’ proposal—business certainty, market competition, innovation, environmental protection, and cost-effectiveness—should serve as useful guidelines of energy tax reform discussions to come. The key positive in Sen.… Read more »
[…] week, OurEnergyPolicy.org hosted a discussion to discuss the tax reform […]
I think the Baucus energy tax reform proposal is a balanced approach worthy of consideration. I like the fact that it is technology neutral and provides long-term stability with respect to… Read more »
The proposed incentives would provide up to a $1.00/gal subsidy for producing biodiesel from algae. Although helpful, this alone will not make algae biodiesel competitive due to the high cost… Read more »